10/23/2021
Many people wonder about the wisdom of using their home equity for paying down debt or for other useful purposes. The answer really lies in what other options, if any, you would have and would your life be better, in measurable ways, if you did use a portion of your hard earned equity to solve a real problem in your life. If your bank can help you with a line of credit or will refinance your current mortgage to payoff all your debt, then that would be your best option. But if they will not help you then an equity lender may be able to.
Remember that most equity lenders , if not all, are going to make sure you always maintain at least a minimum of 20-25% equity after they have loaned you the funds you need. That is good for you and for them. If your home is valued at $500,000 and your current mortgage is at $350,000 then your equity is at $150,000. A private lender could lend you $25-50 thousand leaving you with $100-125 thousand of equity still in your home.
If your credit card payments and others are mounting to where it is making life miserable and you are living month to month, or worse, you are using more credit to live on, then using a portion of your equity to pay off your debts, lower your monthly payments to where you have hundreds left over each month, can bring some much needed sanity and calm back to your life.
Yes, you have used a portion of your equity, and you still have the same amount of debt, but your monthly payments are manageable, your interest costs on your debt are lowered, and your credit score will go back up so you can qualify for the best mortgage rates on renewal.
You can decide if that is a good way to use your equity. I have found that enjoying life is much easier without unmanageable debt, financial worries, and when you can see a reasonable way to pay it all off.
